In 2020, Microsoft founder Bill Gates became one of the largest private landowners in the United States. A surprising move where the ‘nerd’, as he calls himself, left technology to become a farmer Bill with almost 110,000 hectares of farmland in the United States. However, Gates is not the only billionaire interested in American agricultural land: Jeff Bezos accumulates almost 170,000 hectares among his possessions. Why do the fourth and second richest men in the world become ‘farmers’?
They are not really the ones who go down to the crops to plow or plant. “Buy land that is no longer made,” said the writer Mark Twain. “Obviously they are looking for profitability,” says Héctor Rodríguez Marrero, associate director of Agribusiness at CBRE Spain. “They’re looking for a real, simple asset based on land and water,” he adds.
Food security and the availability of fruits and food is essential for the coming decades where, according to United Nations calculations, 10,000 million people will have to be fed. A logistical, agricultural and livestock challenge where food production must grow by 70%.
All this in a context where natural, water and land resources are increasingly limited, either due to urban expansion or soil fertility as a result of climate change. In the last two decades alone, more than 11 million acres of farmland have been lost in the United States.
«In the last ten years the number of investment funds that operate and invest in agribusiness has increased 15 times»
hector rodriguez
Associate Director of Agribusiness at CBRE Spain
The lack of rainfall, fires and overexploitation have caused an increase in the desertification of land. In Spain, three quarters of the country are at serious risk of desertification. “To the problem of climate change, we must add that users are increasingly demanding and want to know where the products they eat come from,” says Regino Coca, founder of Cocampo, a specialized web platform with ads to invest in rustic farms.
The formula is simple: more food demand and less land availability equals higher profits and more profitability. An opportunity that has aroused the interest of many investors. “In the last ten years, the number of investment funds that operate and invest in agribusiness has increased 15 times,” Rodríguez points out.
With more than 3.8 million hectares, Spain is one of the “great attractions for institutional investors”. In addition, “we must add to the equation the Common Agricultural Policy (CAP) that will encourage production in the European Union and that arouses interest in Spain,” adds Coca.
An appetite that is reflected in the transactions of rustic properties in the National Institute of Statistics (INE). Last March, Spain registered 16,378 rustic property transactions, the highest figure since the last months of 2007.
In the first six months of 2022, the INE has recorded 85,502 transactions, 3.92% more than the same period in 2021. “It is the highest figure in the last 15 years,” reveals the founder of Cocampo.
Shelter in times of uncertainty
10 years ago, most investors considered agribusiness (especially in Europe) as a volatile and high-risk investment”, highlights CBRE in its latest report on this type of investment. “Now, the mentality and the paradigm have changed,” they add.
Although the price farmers earn for tilling the land has not risen, the value of the land they farm has. “The returns exist and are subject, for example, to the extension of the land and the economy of scale,” says Coca.
The average price of land for agricultural use in Spain has increased by €56/ha, from €10,124/ha in 2020 to €10,180/ha in 2021
According to data from the Ministry of Agriculture, Fisheries and Food (MAPA), the average price of land for agricultural use in Spain increased by €56/ha, from €10,124/ha in 2020, to €10,180/ha in 2021. In just five years, the figure has expanded by more than 3%.
The lands of Andalusia, Castilla-La Mancha and Castilla León are the ones that arouse the most interest among investors. “However, the most attractive are the farms with water and that are close to the river valleys,” adds the person in charge of Cocampo. “These have less availability for sale.”
The lack of water is the great headache of farmers, ranchers and also investors who seek profitability in these lands. “In recent months we have seen an increase in institutional investors (high net worth) interested in this sector,” says Héctor Rodríguez. “There are also pension funds and, above all, venture capital,” he adds. “The countryside is an active refuge against inflation,” says Coca.
The investment in the lands of the Iberian Peninsula “has no real estate interest and that profitability is not sought,” he reveals. “Professionalization or digitization is preferred, that’s where they pursue it,” says Rodríguez.
The revaluation of the land is not the goal, but the productivity of the crop. “There is a lot of interest in uncultivated land,” highlights the associate director of Agribusiness at CBRE Spain. The change of cultivation to obtain the maximum economic yield is very common in these investments. “Now there is a lot of commitment to woody,” says Coca. “Olive, almond and pistachio trees are the most common for investment,” Rodríguez certifies. A trend that also occurs in livestock. “I recently spoke with a family that wants to bring Angus cows to Spain, because they see that they can get more profit from it,” says the head of Cocampo.
Bubble for renewables
Despite the increase in the price of land, “there is still room for growth,” Regino Coca points out. “There is no bubble, but we must be attentive to the issue of renewables,” he warns. Increasingly, crops and sheep or cows are sharing space with solar panels and large wind farms.
“There is no bubble, but we must be attentive to the issue of renewables”
Regino Coca
founder of Cocampo
There are currently more than 62,000 photovoltaic installations and almost 1,300 wind farms in Spain. Numbers still insufficient to reach the figures of the Law on Climate Change and Energy Transition of 2021, which sets as an objective that the electrical system generate 74% of the energy with renewables in 2030. That supposes an increase in the hectares of land to anchor the wind turbines or fix solar panels.
According to data from the Ministry for the Ecological Transition and the Demographic Challenge, 50% of the land is classified as useful agricultural area with more than 23 million hectares. The coexistence of traditional activities and the production of photovoltaic energy.
“Many funds that invest in renewable energy are betting on agricultural land and that is going to raise the price,” warns Coca. “They also look for productive land that is usually close to water and that is going to generate increases,” she says.
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